Oil prices ease as trade row clouds demand outlook

CNBC

  • Oil prices dipped on Monday as worries that the U.S. could impose additional tariffs on China outweighed concerns over the supply impact of impending sanctions by Washington on Iran.
  • U.S. President Donald Trump is expected to announce fresh tariffs on Chinese imports worth approximately $200 billion as early as Monday, according to a source which spoke to Reuters.

Global oil prices eased in early Asian trading on Monday on concerns that the United States is poised to impose additional tariffs on China, outweighing supply fears from upcoming sanctions on Iran.

Brent crude oil futures dipped 16 cents, or 0.2 percent to $77.93 a barrel by 0035 GMT.

U.S. West Texas Intermediate (WTI) futures fell 20 cents or 0.3 percent, to $68.79 a barrel.

“The market’s expectation of shortages has cooled after data from last week showed increases in supplies, while investors have lowered the outlook for oil demand,” said Wang Xiao, head of crude research with Guotai Junan Futures.

U.S. President Donald Trump is likely to announce new tariffs on about $200 billion on Chinese imports as early as Monday, a senior administration official told Reuters on Saturday.

The escalating trade row is raising concerns about the potential for slower growth in oil consumption, offsetting supply concerns stemming from upcoming U.S. sanctions on Iran over its nuclear program.

Refiners in India, Iran’s second largest crude buyer will cut their monthly crude loadings from Iran for September and October by nearly half from earlier this year.

Also weighing on oil prices, U.S. drillers added two oil rigs in the week to Dec. 1, bringing the total count up to 749, the highest since September, General Electric Co’s Baker Hughes energy services firm said in its closely followed report on Friday.

Oil prices slip as economic growth concerns counter tighter supplies

CNBC

  • U.S. industry start to feel pain of tariffs — survey.
  • OPEC warns of economic slowdown, cuts oil demand forecast.
  • But supply tightens as U.S. sanctions against Iran loom.
  • U.S. crude stocks, output drop.

Oil prices fell on Thursday, reversing some of the strong gains from the previous session, as economic concerns raised doubts about ongoing fuel demand growth.

U.S. West Texas Intermediate (WTI) crude futures were at $69.91 per barrel at 0220 GMT, down 46 cents, or 0.6 percent, from their last settlement.

Brent crude futures slipped 38 cents, or 0.5 percent, to $79.36 a barrel.

The falls came on the back of a potential slowdown in fuel demand growth because of trade disputes between the United States and China as well as emerging market turmoil.

American companies in China are being hurt by tariffs in the growing trade war between Washington and Beijing, according to a survey of hundreds of firms, prompting the U.S. business lobbies behind the poll to urge the Trump administration to reconsider its approach.

The Trump administration has invited Chinese officials to restart trade talks, just as Washington prepares to escalate the U.S.-China trade war with tariffs on $200 billion worth of Chinese goods.

The Organization of the Petroleum Exporting Countries (OPEC) on Wednesday reduced its forecast for 2019 global oil demand growth, pointing to economic risks.

In its monthly report, OPEC said world oil demand next year would rise by 1.41 million barrels per day (bpd), 20,000 bpd less than last month and the second consecutive reduction in the forecast.

Tighter supply

Despite this, the short-term outlook for oil markets is for tighter supply.

Brent rose above $80 per barrel the previous session for the first time since May, spurred by expectations that U.S. sanctions against Iran’s oil exports, which will start in November, will tighten global markets.

WTI was pushed over $70 the previous session due to falling crude inventory and production levels.

U.S. crude inventories fell 5.3 million barrels in the week to Sept. 7 to 396.2 million barrels, the lowest since February 2015 and about 3 percent below the five-year average for this time of year, the U.S. Energy Information Administration (EIA) said on Wednesday.

Stephen Innes, head of trading for Asia-Pacific at futures brokerage Oanda in Singapore, said the inventory data showed “a much deeper drop than analyst’s expectations.”

U.S. crude oil production fell by 100,000 bpd, to 10.9 million bpd, as the industry faces pipeline capacity constraints.

Innes said the slight dips on Thursday came as rising refined product inventories, which the EIA also reported, “slightly dampened market overexuberance” as it indicated that U.S. fuel demand may be weakening.

Gasoline stocks rose 1.3 million barrels, while distillate stockpiles , which include diesel and heating oil, climbed by 6.2 million barrels, the EIA data showed.

Oil prices rise on lower U.S. crude inventories, looming Iran sanctions

CNBC

  • American Petroleum Institute reports 8.6 million-barrel decline in crude inventories.
  • Russia warns of fragile oil market but says it can raise output.
  • Hurricane Florence to hit U.S. East Coast on Friday.

Oil prices rose on Wednesday following a report of declines in U.S. crude inventories and as looming sanctions against Iran raised expectations of tightening supply, while top producer Russia warned of a fragile global crude market.

U.S. West Texas Intermediate (WTI) crude futures were at $69.84 per barrel at 0428 GMT, up 59 cents, or 0.9 percent, from their last settlement. WTI futures gained 2.5 percent in the previous session.

Brent crude futures climbed 28 cents, or 0.4 percent, to $79.34 a barrel. Brent has climbed for four straight sessions, gaining 2.2 percent the previous day.

“Oil prices jumped overnight as American Petroleum Institute inventory data showed a large drawdown in inventories,” said William O’Loughlin, investment analyst at Australia’s Rivkin Securities.

U.S. crude stocks fell by 8.6 million barrels in the week to Sept. 7 to 395.9 million barrels, the American Petroleum Institute (API), a private industry group, said on Tuesday.

Official weekly government data will be published by the U.S. Energy Information Administration (EIA) on Wednesday.

Regarding crude oil production, the EIA said on Tuesday it expected U.S. output to rise by 840,000 barrels per day (bpd) between 2018 and 2019 to 11.5 million bpd, lower than a rise of 1.02 million bpd to 11.7 million that was previously forecast.

Outside the United States, traders have been focusing on the impact of U.S. sanctions against Iran that will target oil exports from November.

Washington has put pressure on other governments to also cut imports, and many countries and companies are already falling in line and reducing purchases, triggering expectations of a tighter market.

“Fragile” market

Russian energy minister Alexander Novak on Wednesday warned of the impact of U.S. sanctions against Iran.

“This is huge uncertainty on the market – how the countries, which buy almost 2 million barrels per day of Iranian oil will act. The situation should be closely watched, the right decisions should be taken,” he said.

Novak said global oil markets were “fragile” due to geopolitical risk and supply disruptions.

“It is related to the fact that not all the countries have managed to restore their market and production,” he said, referring to outages and falling production in Mexico and Venezuela.

Should markets overheat and prices spike, however, Novak said Russia could boost its output.

“Russia has potential to raise production by 300,000 barrels (per day) mid-term, in addition to the level of October 2016,” he said.

That month Russia produced 11.247 million bpd, a post-Soviet Union record-high.

Oil markets were also eyeing Hurricane Florence offshore the United States amid surging demand for gasoline and diesel.

The storm is expected to make landfall on the U.S. East Coast on Friday, and has caused fuel shortages as millions of households and businesses have evacuated.

Front-month gasoline futures rose 0.5 percent on Wednesday, while heating oil futures increased 0.4 percent.

Oil firm as Iran sanctions loom, but US seeks to prevent supply shortfall

CNBC

  • U.S. sanctions to target Iran oil exports from November.
  • Washington wants other producers replace falling Iran exports.
  • Asian refiners buy American oil to make up for Iranian supply.

Oil was steady on Tuesday, supported by looming U.S. sanctions against Iran’s petroleum industry.

But prices were capped by signs that increased supplies by other major producers, including the United States and Saudi Arabia, could make up for the disruptions from Iran.

U.S. West Texas Intermediate (WTI) crude futures were at $67.61 per barrel at 0112 GMT, up 7 cents from their last settlement.

Brent crude futures climbed 11 cents to $77.48 a barrel.

“It was a mixed performance in the crude oil market,” said ANZ bank in a note, pointing to Washington’s sanctions against Iran’s oil exports that will be enforced from November.

Washington is putting pressure on other countries to also cut Iran imports, with close allies like South Korea and Japan, but also India, showing signs of falling in line.

ANZ bank said prices were capped “amid speculation later in the day that Saudi Arabia and Russia will fill any gap.”

U.S. Energy Secretary Rick Perry met with Saudi Energy Minister Khalid al-Falih on Monday in Washington, the U.S. Energy Department said, as the Trump administration encourages big oil-producing countries to keep output high ahead of the renewed sanctions.

Perry will also meet with Russian Energy Minister Alexander Novak on Thursday in Moscow.

Russia, the United States and Saudi Arabia are the world’s three biggest oil producers by far, meeting around a third of the world’s almost 100 million barrels per day (bpd) of daily crude consumption.

Combined output by these three producers has risen by 3.8 million bpd since Sept. 2014, more than the peak 3 million bpd Iran has managed during the last three years.

Big U.S. discount

With Middle East crude markets tightening because of the U.S. sanctions against Iran, many Asian refiners are seeking alternative supplies, with South Korean imports of U.S. crude likely hitting a record in November.

At the same time, American oil producers are seeking new buyers for crude they used to sell to China before orders virtually dried up because of the trade disputes between Washington and Beijing.

Traders said this pulled wide open the discount of U.S. WTI crude versus Brent to almost $10 per barrel, the biggest since June.

Oil climbs as US drilling stalls, Washington sanctions against Iran loom

CNBC

  • U.S. rig count has stagnated since May.
  • U.S. sanctions against Iran’s oil sector tighten market — FGE
  • Washington to meet with Saudi, Russia to discuss oil policy.
  • U.S.-China trade dispute drags on global markets

Oil prices rose on Monday as U.S. drilling for new production stalled and as the market eyed tighter conditions once Washington’s sanctions against Iran’s crude exports kick in from November.

U.S. West Texas Intermediate (WTI) crude futures were at $68.19 per barrel at 0344 GMT, up 44 cents, or 0.65 percent, from their last settlement.

Brent crude futures climbed 50 cents, or 0.65 percent, to $77.33 a barrel.

U.S. energy companies cut two oil rigs last week, bringing the total count to 860, energy services firm Baker Hughes said on Friday.

The U.S. rig count has stagnated since May, after staging a recovery since 2016, which followed a steep slump the previous year amid plummeting crude prices.

Outside the United States, new U.S. sanctions against Iran’s crude exports from November were helping push up prices.

Energy consultancy FGE said several major Iran customers like India, Japan and South Korea were already cutting back on Iran crude.

“Governments can talk tough. They can say they are going to stand up to Trump and/or push for waivers. But generally the companies we speak to … say they won’t risk it,” FGE said.

“U.S. financial penalties and the loss of shipping insurance scares everyone,” it said in a note to clients.

Tighter outlook?

With U.S. rig activity stalling and Iran sanctions looming, the oil market outlook is tightening.

“Investors have largely turned positive again … likely welcoming the return of backwardation,” said Edward Bell, commodity analyst at Emirates NBD bank.

Backwardation describes a market in which prices for immediate delivery are higher than those for later dispatch. It is considered a sign of tight conditions giving traders an incentive to sell oil immediately instead of storing it.

The Brent backwardation between October this year and mid-2019 is currently around $2.20 per barrel.

While Washington exerts pressure on other countries to fall into line and also cut imports from Iran, it is also urging other major producers to raise their output in order not to create too strong a price spike.

U.S. Energy Secretary Rick Perry will meet counterparts from Saudi Arabia and Russia on Monday and Thursday, respectively, as the Trump administration seeks the world’s biggest exporter and producer to keep output up.

One key question going forward is how demand develops amid the trade dispute between the United States and China, as well as general emerging market weakness.

Asian shares started the week in the red on Monday, faltering for the eighth straight day as U.S. President Donald Trump threatened yet more import tariffs on Chinese goods.

Consultancy FGE warned that “trade wars, and especially rising interest rates, can spell trouble for the emerging markets that drive (oil) demand growth.”

Despite this, FGE said the likelihood of significantly weaker oil prices was relatively low as the Organization of the Petroleum Exporting Countries (OPEC) would withhold output to prevent prices from plunging.

“We see $65 per barrel as a trigger for cuts,” FGE said.